Yesterday, I referenced Matt Trivisonno’s chart on federal withholding taxes in order to defenestrate some wildly inaccurate research from TrimTabs. I don’t know what the specific methodology employed by TrimTabs
actually was, but simply calling 4.1% tax receipt increase proof that the recession is now over, in light of the overall data series, is not only wildly poor math, its awful analysis.
Let’s revisit the issue of federal withholding data, only this time considering a different time frame: If we look at the quarterly data, instead of the shorter term charts, we see something interesting: Quarter-over-Quarter, withholdings are now down 0.09% – the first negative quarterly number since 4Q03.
Note how comparable this first quarterly drop in years is to the first recessionary quarter in 2001.
Quarterly Percentage Gains, Federal W/H Tax Receipts
Chart courtesy of Matt Trivisonno
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Here’s the odd thing about this: I went from trashing a horrific quote by Biderman (Blaming the Retail Investor) to praising his intellectual flexibility (Consumer Spendables Indicator) to critiquing his firms flawed analysis (TrimTabs: Its a Recession, and Its Already Over (Wrong)).
I don’t know what the significance of this is, but I thought it was worth pointing out . . .
My first thought is similar to the discussion on the post below – this is another data series that does not factor in illegal immigration effects. The shadow labor force could surge or decline – and I think in the last few years it has done both, abruptly – and it would not show up in tax withholdings.
Barry, good chart from Matt.
It would interesting to see this overlayed with some more macoeconomic data, such as quarterly change in GDP.
It also be interesting to see this chart combined with a nominal/real dollar bar chart the same time periods. Then both declines and increases can been seen in the context of overall tax raising by the federal government. We’d see, I bet, a nice strong upward trend, punctuated by a few sharp declines…you know, kinda like our economy in general.
Boy, it really fell off a cliff there. I mean, there’s no trend at all. So maybe some of it’s an anomaly.
Still, there’s plenty of explanations that occur. Among them: more people dropping out of the employment picture; more people working Walmart jobs; more people changing their witholding status.
-jim
A more useful tool would be the quarter self-employment tax payments.
Don’t have the data but it anecdotally seems that more people are 1099ers now than ever….truckers, realtors, contractors, etc.
I suspect that 1099ers are the canaries and self-employment tax revenues has been stagnant/decline well before weakness in the withholding data.
“I went from trashing……to praising…….to critiquing……”
I think it means he’s too screwed up for you to be able to make any sense of what he says on a consistent basis.
Just to follow up with an anecdotal bit of info about jobs. I have for years been on a woodworking liquidation mailing list. The company, ironically called IRS (http://www.irsauctions.com) auctions off the machine assets of companies that have gone bust. These are usually big outfits with many huge machines on offer.
I’ve been amazed by the steady stream of furniture and related factory closures over the past three or four years. Just when I think there can’t be any more left more come through. Yesterday there was new one listed that had almost all new equipment and there was a lot of it. Not surprisingly it was a bank that was the instigator of the auction.
It’s well known that furniture manufacturing has gone over seas over the past decade or so. I’m guessing that what we’re seeing in this continued stream of business failures is the housing crash choking off the few domestic manufacturers who remain.
Then, of course, there’s the issue of all the employees in these companies being out on the street.
-jim
painful
balancing of US Standard of Living (wage)
to World Standard of Living (wage)
There are so many variables I’ll treat it as more info porn since I can’t really see what they are trying to say with that (it appears they don’t either!!!)
BTW is it a mere coincidence that the Jobless claims are the worst in 1.5 years (and that is not saying much due to the upward revisions it will get next month) and our market got pushed up almost 400 pts two days prior to that release??
Fix is in…
when will people wake up to see that this administration is slowly pushing you out of the market?? People like BR need to seriously grow a pair and call this crap out instead of pussy footing around with phrases like “maybe, kind of, could of” when it pertains to any comments on manipulation.
You know they do it……you know how they do it…yet as long as a few bucks can be made off of it no one seems to care.
What people do not seem to see is that all bubbles pop at some point…no matter how carefully managed they are. Not only will this one pop…it may have the very effect of taking most of you with it and then remove you from being able to make ANY money from this market.
Bloggers and media people need to seriously grow some balls and take this problem on pronto or the market will be full of the 1% social class and manipulation will be even worse.
Wake up and see what’s going on around you instead of counting the short term money….we have a long term problem that has no solutions…
Ciao
MS
This Biderman is a hack…he likes to send Maria Bartiromo little bullish emails right before the bell. Ignore him as you would any government data.
Trim Tabs has gone to the Kudlow 101 school of “pull the numbers out of your ass” and make your point….
Don’t know, but: Is the source of income generating those withholdings distinguishable? Couldn’t it also be folks withdrawing a lumpsum from their retirement funds early to live on or other. I assume there must be a corresponding rise in state’s withholdings too. When he says U.S Workers does that include H1-B/L1, etc? When he makes an estimate of jobs added is that net of terminations/layoffs? What’s the impact on withholdings for corporate severance benefits?
Hold on a second!! I’m am totally confused by Matt’s graph!
When you look at his other graphs that show the year-over-year change of the daily receipts, the growth rate is declining but still still postive at 4-6% growth range over the quarter. Now, for the quarter as a whole, there was no growth?! I don’t get it!
Hi wedwards,
The quarterly growth number is different than the year-over-year growth because two different periods are being compared. The data point for March 31st on my yearly chart is actually a comparison between the year ended March 31, 2008 and the year ended March 31, 2007. Since we didn’t go over the waterfall until the first quarter of this year, the quarterly comparison looks a bit worse.
Matt